Taxis, like all other cars, clog up the roads with their inefficient size to passengers ratio, and pollute the air. Limiting the number of taxis can be a matter of maintaining a half way liveable city.
If there were plenty of cheap taxis in my town (Amsterdam) I would use them a lot, because I'm a big fat lazy motherfucker. Unfortunately, there are too many people like me, and our selfishness would be detrimental to the society around us.
(I'm typing this as it's pouring outside and I have to get to the office. I would love a cheap taxi right about now, but the world doesn't revolve around me.)